Philips Healthcare financial update. Ingo Bank, CFO Philips Healthcare

Transcription

1 Philips Healthcare financial update Ingo Bank, CFO Philips Healthcare

2 Agenda Healthcare s performance Growth, earnings, ROIC Path to value Accelerate! in Healthcare Key takeaways 2

3 Sales growth continuing in 2012 supported by solid equipment order intake development Comparable sales growth 1 Comparable equipment order intake growth 6% 4% 5% 6% 3% 9% 3% 4% -3% -6% Q LTM Q LTM 1 Comparable sales growth: adjusted for currency and portfolio LTM: Last twelve months March

4 Equipment order book with solid growth momentum Indexed equipment order book development Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Q1/2008 = 100% 4

5 Sales growth driven by strong market positions in growth geographies and North America Growth geographies share of total revenue now 22% Comparable sales growth 1 North America Growth geographies 7% 6% 15% 16% 0% 8% 0% Q LTM Q LTM 12% Other mature markets 2 4% Western Europe 4% 8% -4% -2% Q LTM Q LTM 1 Comparable sales growth: adjusted for currency and portfolio 2 Other mature markets includes: Japan, South Korea, Australia, New Zealand, Israel 5

6 European business outlook continues to be challenging Region/Market Notes Market outlook 2012 Germany Nordics Benelux Business climate outlook for medical equipment remains positive Denmark and Sweden positive, Norway negative outlook Procurement changes between hospitals and insurance companies cause delays in equipment purchase decisions France United Kingdom /Ireland Iberia Italy Greece Weak economic outlook, public spending subdued Positive signs in Q1 by government toward public health care spending, still cautious on outlook Most severe austerity measures in history announced by Spanish government Significant health care public spending reductions by new government Outlook continues to be very negative Market growth negative Market growth flat Positive market growth 6

7 2011 EBITA reflects a step-up in investments in selling expenses, innovation and manufacturing footprint Reported EBITA EUR millions, as % of sales Channel presence in growth geographies strengthened by increasing selling expenses by 25% 13.8% 12.9% Accelerated innovation by increasing year-on-year spend by 9% 11.0% 10.8% Increased investment in our manufacturing footprint in India and China impacted margins in Imaging Systems ,186 1, Temporary increase in investments for operations to support the successful launch of an unprecedented array of new products into key markets Lower Q4 results impact 2011 EBITA by 1% 7

8 Investments in longer term, structural expansion in growth geographies to generate improved returns Sales increase in growth geographies Headcount in growth geographies Number of FTEs +23% p.a. +13% p.a Sales and service resources: 2x R&D resources: 3x Manufacturing footprint: 2.5x 8

9 Having invested in working capital second half 2011, now converting it back into free cash flow Improving inventory turns will provide increased cash flow Adjusted net working capital as % of LTM sales 1 Free cash flow as % of reported EBITA Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q LTM 2012 Adj. net working capital As a % of LTM sales FCF FCF as % of EBITA 1 Net working capital adjusted to exclude forward currency contract assets/liabilities 2 Free cash flow is defined as cash flow from operating activities minus net capital expenditures 3 LTM: Last 12 months March

10 Improving our return on invested capital 80%+ of invested capital is in intangibles; margin expansion and growth are key drivers 10% 8% Return on invested capital (1) Q1 2012, LTM, (1) Tangible assets Net operating capital % of total Other assets ~20% 6% 4% 2009 Intangible assets 2% ~80% 0% -2% 2011 (2) Q1/ 12, LTM (2) Goodwill -4% (4) Net operating capital turnover (3) December ROIC is normalized for Q2/2011 impairment charges 2 ROIC as reported 3 Net operating capital turnover calculated as sales divided by average net operating capital 4 Net operating capital turnover = 1 10

11 Improve Healthcare performance to achieve midterm target of 15% to 17% EBITA by Philips Healthcare midterm performance Comparable sales growth (%) Performance Box 2013 Midterm financial objective (2013) Reported EBITA 15% to 17% EBITA % 1 Assuming market growth of 4-5%, with Philips Healthcare aiming to grow stronger than the market 11

12 Improve Healthcare performance to achieve midterm target of 15% to 17% EBITA by % 12.9% 15.0% 2011 EBITA Growth Operational efficiency Overhead cost reductions Investments Medical device excise tax Pensions 2013 EBITA Accelerate! 12

13 Our cost innovation program as part of Accelerate! is progressing well Strategic priorities Expanding mfg. volumes in growth geographies Low-cost country sourcing Substantial progress +450 bps +800 bps BOM savings Service parts cost innovation Improving productivity Growing our share of low-cost country sourcing Percentages represent low-cost purchasing value in % of total purchasing value Improving productivity (amount in millions) Mfg. cost improvement 20+% Manufacturing costs as % of BOM costs 13

14 Improving our operating model under Accelerate! Driving support functions toward benchmark cost levels Finance transformation World class human resources Rationalize real estate footprint Consolidate accounting and financial planning and analysis related work, into centers of expertise Simplify, standardize, automate Reduce overall finance cost by 25% Centralization into shared services and increased automation Reduce overall HR cost by 20% Fund expansion in growth geographies through consolidation of mature market real estate footprint Reduce building footprint and real estate cost by mid-single digits 14

15 Significant additional cash flow potential through inventory optimization as part of Accelerate! Increasing inventory velocity will provide increased cash flow Inventory as % of Sales 18% 20% <17% Dec 2010 Dec 2011 Dec 2013 Program Focus Impact Sales and operations planning Lean/Just in time Near sourcing Tighter and increasingly aligned supply/demand driven by business-market handshakes Elimination of waste and buffers for unrewarded complexity Shorter supply lines, less transportation and higher agility 40% 30% 15% Vendor-managed inventory Pay as you go 15% 15

16 Key takeaways Strong outlook for growth geographies, steady market outlook for North America, challenging outlook for most countries in Europe Sales growth will lead to margin expansion, increase capital turnover and ROIC Accelerate! as key driver on our Path to Value towards 15% to 17% EBITA 16

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